Overall EU spending proposed by Herman Van Rompuy remains €50bn higher than the initial British demand
David Cameron launched an attack on the EU's bureaucracy on Thursday, demanding €6bn (£4.85bn) in cuts to the pay, pensions and perks of thousands of European officials over seven years from 2014.
As the prime minister prepared to water down his initial demands for swingeing cuts in overall EU spending, he handed a list of proposed cuts to the entitlements of EU officials to the European council president, Herman Van Rompuy.
One EU official said many in Brussels believe that Britain is taking a tough stance on the relatively small administrative spending to mask a change of tack in Cameron's plans for a real terms freeze in the overall EU budget.
While Cameron told Van Rompuy he was pleased with big budget cuts tabled last week by Brussels, the spending proposed by Van Rompuy remains €50bn higher than the initial British demand. The Van Rompuy paper reduced European commission budget proposals by €81bn.
Stepping up his campaign against eurocrats, Cameron urged further cuts to administration costs by:
• Increasing the retirement age to 68 for all EU officials now under the age of 58. The current retirement age is 63. This would save €1.5bn.
• Cutting the overall EU pay bill by 10% for officials, saving €3bn.
• Lowering the pension cap from 70% of an official's final salary to 60%, saving €1.5bn.
A UK official said: "These are not dramatic changes. The commission and others are telling the Greeks, the Italians and others that they should put the retirement age up to 68. In the UK we have cut [public sector] pensions to a career average salary. They argue that it is very difficult legally to change people's terms and conditions. Well, we have managed it in the UK."
The commission has proposed increasing the administrative budget from €56bn to €63bn. Van Rompuy has proposed a trim to €62.63bn. Cameron told Van Rompuy the EU should follow the example of Whitehall which has imposed cuts of between 25%-30% in administrative costs. One British official said: "We can save tens of billions compared with what is on the table."
While Van Rompuy was said not to have responded to UK demands, Jose Manuel Barroso, the commission president, was reported to have reacted defensively.
Under pressure from Barroso, Van Rompuy has already minimised his proposed cuts to eurocrats' terms and conditions to €500m over seven years. Some of the British demands are also supported by the Germans and the Dutch.
EU officials accept it is difficult to argue with the need for cuts in the cost of administration during a time of austerity, though there is anger that Britain has declined to publish the salaries of its diplomats in Brussels. They receive generous housing allowances and live in the most exclusive areas of Brussels such as Ixelles in the centre and Tervuren on the outskirts.
Cameron is encouraged by Van Rompuy's proposed "payment ceiling" – the amount that is due to be paid out – of €940bn, compared to the first European commission payment ceiling of €987.6bn. Britain is insisting that the overall figure has to come in below €940bn. But Cameron appeared resigned to accepting he would not achieve his original target figure of €886bn.
The administration costs of the EU represent only 6.4% of the overall budget. Senior UK officials admit that big savings cannot be made there, but emphasise that the issue is "very symbolic" not only, but especially, in Britain.
Cameron highlighted the "Connecting Europe" project, which is designed to connect the continent through transport and energy infrastructure projects. The European commission has proposed increasing this by 350% – from €8bn to €36bn. Britain believes this should be merely doubled to €16bn.
One EU official said: "David Cameron lectures us all on the need to draw up a budget for growth. And yet he now wants to cut the very part of the budget that will build up transport, energy and broadband infrastructure."
Another EU official pointed out that it is designed to help fund the proposed high speed rail link from London to Birmingham and the electrification of the Great Western rail line.
Cameron's decision to target the growth budget and administrative costs for cuts shows Downing Street has accepted that Britain will not win any further cuts in the two highest areas of expenditure. These are the Common Agricultural Policy (CAP) and structural funds that help build the infrastructure of poorer areas, notably in eastern Europe.
France's president, Francois Hollande, arrived at the summit incensed at proposed cuts to the farms budget of some €60bn compared to the current seven-year period and also embittered at having currently to fund a quarter of Britain's annual €3.6bn rebate.
He sought to gain the support of the German chancellor, Angela Merkel, before the summit started, but was said to have found little sympathy. The French said they were in no hurry to reach a deal, indicating that the summit could collapse in failure over the next 48 hours.
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